Driverless Cars (a pdf file)

The Economist, Oct. 20, 2012 -- Schumpeter
The driverless road ahead
Carmakers are starting to take autonomous vehicles seriously. Other businesses should too
THE arrival of the mass-produced car, just over a century ago, caused an explosion of business
creation. First came the makers of cars and all the parts that go into them. Then came the
garages, filling stations and showrooms. Then all sorts of other car-dependent businesses: car
parks, motels, out-of-town shopping centres. Commuting by car allowed suburbs to spread,
making fortunes for prescient housebuilders and landowners. Roadbuilding became a far bigger
business, whereas blacksmiths, farriers and buggy-whip makers faded away as America’s horse
and mule population fell from 26m in 1915 to 3m in 1960.
Now another revolution on wheels is on the horizon: the driverless car. Nobody is sure when it
will arrive. Google, which is testing a fleet of autonomous cars, thinks in maybe a decade, others
reckon longer. A report from KPMG and the Centre for Automotive Research in Michigan
concludes that it will come “sooner than you think”. And, when it does, the self-driving car, like
the ordinary kind, could bring profound change.
Just imagine. It could, for a start, save the motor industry from stagnation. Carmakers are fretting
at signs that smartphone-obsessed teenagers these days do not rush to get a driving licence and
buy their first car, as their parents did. Their fear is that the long love affair with the car is fading.
But once they are spared the trouble and expense of taking lessons and passing a test, young
adults might rediscover the joys of the open road. Another worry for the motor industry is that
car use seems to be peaking in the most congested cities. Yet automated cars would drive noseto-tail,
increasing the capacity of existing roads; and since they would be able to drop off their
passengers and drive away, the lack of parking spaces in town might not matter so much.
Cars have always been about status as well as mobility; many people would still want to own a
trophy car. These might not clock up much mileage, so carmakers would have to become more
like fashion houses, constantly creating new designs to get people to swap their motors long
before they have worn out. But cars that are driverless may not need steering wheels, pedals and
other manual controls; and, being virtually crashless (most road accidents are due to human
error), their bodies could be made much lighter. So makers would be able to turn out new models
quicker and at lower cost. Fresh entrants to carmaking could prove nimbler than incumbents at
adapting to this new world.
All these trends will affect the car business. But when mass-produced cars appeared, they had an
impact on the whole of society. What might be the equivalent social implications of driverless
cars? And who might go the same way as the buggy-whip makers? Electronics and software
firms will be among the winners: besides providing all the sensors and computing power that
self-driving cars will need, they will enjoy strong demand for in-car entertainment systems, since
cars’ occupants will no longer need to keep their eyes on the road. Bus companies might run
convoys of self-piloting coaches down the motorways, providing competition for intercity
railways. Travelling salesmen might prefer to journey from city to city overnight in driverless

Winnebagos packed with creature comforts. So, indeed, might some tourists. If so, they will need
fewer hotel rooms.
Cabbies, lorry drivers and all others whose job is to steer a vehicle will have to find other work.
The taxi and car-rental businesses might merge into one automated pick-up and drop-off service:
GM has already shown a prototype of a two-seater, battery-powered pod that would scuttle about
town, with passengers summoning it by smartphone. Supermarkets, department stores and
shopping centres might provide these free, to attract customers. Driverless cars will be
programmed to obey the law, which means, sadly, the demise of the traffic cop and the parking
warden. And since automated cars will reduce the need for parking spaces in town, that will
mean less revenue for local authorities and car-park operators.
When people are no longer in control of their cars they will not need driver insurance—so
goodbye to motor insurers and brokers. Traffic accidents now cause about 2m hospital visits a
year in America alone, so autonomous vehicles will mean much less work for emergency rooms
and orthopaedic wards. Roads will need fewer signs, signals, guard rails and other features
designed for the human driver; their makers will lose business too. When commuters can work,
rest or play while the car steers itself, longer commutes will become more bearable, the suburbs
will spread even farther and house prices in the sticks will rise. When self-driving cars can ferry
children to and from school, more mothers may be freed to re-enter the workforce. The
popularity of the country pub, which has been undermined by strict drink-driving laws, may be
revived. And so on.
Getting there from here
All this may sound far-fetched. But the self-driving car is already arriving in dribs and drabs.
Cars are on sale that cruise on autopilot, slot themselves into awkward parking spaces and brake
automatically to avert collisions. Motorists seem ready to pay for such features, encouraging
carmakers to keep working on them. The armed forces are also sponsoring research on
autonomous vehicles. Some insurers offer discounts to drivers who put a black box in their cars
to measure how safely they drive: as cars’ computers get better than humans at avoiding
accidents, self-drive mode may become the norm, and manual driving uninsurable.
The first airline to operate a regular international schedule began in 1919, only 16 years after the
Wright Brothers showed that people really could fly in heavier-than-air planes. For those
businesses that stand to gain and lose from the driverless car, the future may arrive even quicker.